AB Volvo

Welcome to the Volvo Group press conference for the second quarter. We will do as usual. We'll start off with presentations by our CEO, Martin Lundstedt, and our CFO, Tina Hultqvist. And then we will follow up with a Q&A session. And with that, Martin, I leave the word to you.

Thank you, Krister. And also from my side, welcome to the second quarter business update from the Volvo Group. We continue to experience a challenging business context with complexity and uncertainty that I have never experienced before. And in August, it will actually be 30 years since I entered into this industry. So it is really challenging times. A devastating war in Europe, a continuous pandemic with further lockdowns in different regions, supply chain and logistical constraints and an increasing inflationary pressure, among other things. And with all these factors in mind, I'm so proud to report that we delivered a very strong result in the second quarter, both in terms of volumes, profitability and return on capital employed. Net sales were up with 31% or almost 30 billion in the quarter to 119 billion SEK with major contributions coming from increased vehicle and service volumes. from positive price realization and from favorable currency effects. But also excluding currency on the top line, sales still grow with an impressive level of 20%. We also continue to serve our customers in a good way. We improved our market shares in almost all regions and brands, and we continue to grow our services. The whole organization has been doing a fantastic job by working closely both with our customers and supply chain and other business partners and thereby riding out many of the challenges we and the industry are faced with and making also the group continuing to maneuver from a position of strength. Among our customers there is still a high activity level both in the transport and construction segments despite the global turmoil. Demand continues to be larger than supply and order books are more or less full for 2022. But with a high level of uncertainty in the general economy, it is important to maintain discipline in the order book management. In addition, we continue to have a high level of flexibility in all parts of the organization to be able to swiftly adapt to changes in market conditions. So to summarize the quarter highlights, we've had, as I already said, a strong top line development with an all time high quarter in group trucks and in Volvo Penta. The adjusted operating margin amounted to 13.7 billion SEK at a margin of 11.6%. despite our conscious decision to run manufacturing with extra flexibility to serve our customers in the best possible way. But that is, of course, coming with an extra cost. But we have seen this strategy paying off in the positive market share development. The group continued to deliver good return on capital employed in industrial operations at a level of almost 27%. And despite the strong performance, the constrained supply chain situation continues and visibility remains low also moving forward. And we need to continue to adapt on a day-to-day basis. But albeit the challenges, we deliver strong financial performance in the second quarter. The total truck deliveries increased with an impressive 33% to almost 61,000 units. This was a great achievement thanks to our colleagues in all markets together with a complete supply chain, both internally, purchasing production, but also with all our supply chain partners. And the result was an all-time high production in global trucks operation for a single quarter. Volvo Construction Equipment's deliveries decreased with 27%, mainly on the back of lower volumes in China. And construction equipment, or VCE, also had some impact from strained supply chains in the quarter. Demand for electric vehicles continues to accelerate as the number of companies with pledged science-based targets are addressing their different CO2 footprints, where the decarbonization of logistics and construction activities are main focus areas on that journey. All Volvo Group business areas continue to drive their sales of electric solutions, and we continue to see a positive book to build with a steady growth rate that shall remain for many years to come. The volume development is encouraging since we are strongly focused on keeping our leading position in this field. In quarter two, we opened the order book for the heavy duty Volvo electric truck in Europe, and we are starting production and ramp up of these trucks in the third quarter this year. Orders across all business areas amounted to almost 1,500 units while we delivered 434. A strong momentum and a strong book-to-bill ratio. To strengthen our service business has been and will continue to be a key priority as we continue to untap the service potential on the back of high vehicle utilization amongst our customers and broader and wider adoption of service contracts. Service growth adjusted for FX was 11%, with good momentum in all business areas, which serves as a good indicator that our customers' activities are high and that our focused efforts in the service field is paying off. Service sales' 12-month rolling is now close to 100 billion SEK. And when it comes to trucks and the truck news, despite the global turmoil, we continue to present innovative news. Some important examples during the quarter. Volvo Trucks showcased its first fuel cell electric truck, as you might have been seeing on the introduction video. The truck has a range of 1,000 kilometers, produces through the fuel cells its own electricity on board, and it only emits water. Volvo Trucks also will introduce frame rails or side members made of fossil free steel in its battery electric heavy duty trucks. This is another important step on our journey towards our net zero commitment and to maintain also our leading position of applying fossil free steel in serious production. In the quarter, we also opened our first assembly plant for battery packs in Ghent, Belgium. In the new battery plant, cells and modules from Samsung SDI will be assembled into battery packs that are tailor-made for our heavy-duty electric ranges. And production now will coincide with the launch and the ramp-up in production of our heavy-duty Volvo trucks. On the back of high transport activities and pent-up replacement need, demands for trucks is continuing to be strong. Stronger than the industry currently can deliver. We keep our market forecast unchanged for European Union and North America at 300,000. But the total market outcome for 2022 will ultimately depend on how much the industry can deliver. Also in Brazil, a continued good momentum in the commodity and agriculture business, even if we see some weakening signs in the general economy, but we are keeping and maintaining our forecast also in this market. The forecast for China is further reduced to 800,000. We had reduced it to 1 million trucks for medium and heavy duty in last quarter, but we are further reducing to 800,000 on the back of lower economic activity and recent lockdown effects in several provinces in China. It is important to state that we have done now a number of quarters in a row that market forecasts are based on current visibility, which continues to be low. Uncertainty is significant due to inability to predict supply chain capacity and the ongoing COVID-19 pandemic and also the war in Ukraine. We continue to be restrictive in order slotting to manage order book quality and cost inflation. It is therefore increasingly important to keep even higher quality and transparency in the order book in case the economy is slowing down and when the economy will correct here. Orders in quarter two decreased with 8% and deliveries increased with 33%. And when we look to the order decrease of 8%, we have a higher bar to book firm orders due to long order book, but also to ensure pricing flexibility given the inflationary environment. However, as I have stated already in last report and the report before that, The order intake is currently not the best indicator of the market activity going forward. It is rather the size of the order book, the fleet utilization, the used trucks business and customer finance. And all these indicators are still healthy. Truck deliveries increased with an impressive 33% on the back of really hard work in the whole supply chain. And we are running our manufacturing system on a high level with extra flexibility. And we see that this is paying off in terms of volumes. It is also important for me to note that when we look at the balance, the book-to-bill and the sequential, book-to-bill was 88%, meaning that the order book decreased with seven thousand five hundred units or one and a half to two weeks and knowing that the order book almost filled now for 2022 this is a moderate decrease but we need to continue to work with that so we have the right type of lead time we had about a month of stop days in quarter two In quarter 2021 and for the same quarter this year, it was more or less a week instead, so a considerable improvement here. Apart from specific supply chain challenges for MAC in North America with some lost market shares, we have made good progress in all major regions during the quarter and first semester as regards market shares. Our commercial organization has done a great job to combine an increased market share together with an improved price position to offset the cost inflation. It also shows fantastic efforts by our colleagues in the industrial system together with all our supply chain partners. In Europe, strong total market shares by Volvo and Renault growing to 19.3% and 9.6% respectively and combined 28.9%. That is an all-time high for us. Electric market shares was even better, almost 37% for Volvo and almost 19% for Renault. So significantly higher than our strong diesel market share. In North America, I have already commented Mac, but Volvo is growing up to 10.5%. In Brazil, strong performance, growing the market shares to almost 26%. And for South Africa and Australia also, the Volvo Group has a market share above 20%, also very strong development. For Volvo Construction Equipment in early June, VCE became the first manufacturer to deliver a construction machine built using fossil-free steel to a customer for use in commercial operations. The handover took place at the United Nations Stockholm 50 plus event. Volvo Construction Equipment also announced a majority investment into Dutch firm Limac. This investment complements Volvo C's capabilities and product ranges when it comes to electrified products. In general, we do see a continued good demand with the exception of China. Construction activity in both Europe and North America remained high in Q2. However, the total market deliveries were impacted by limited machine availability because of supply chain constraints. In general, the construction equipment supply chain challenges came later than in the truck industry and hit mostly into 2022 here. Market forecast remains unchanged since last quarter for all regions. But also here, as I said on the truck side, market forecasts are based on current visibility, which is low. Also, when it comes to orders and deliveries, VC has had a restrictive order slotting to manage order book quality and cost inflation, very similar to trucks. In addition, we need to continue to deliver on the overshoots in order intake in 2020 and 2021. And it is very important to do that now step by step. BCE has well-filled order books and long lead times following the strong order intake in previous quarters, as I said, not at least in North America, as you can see in the graph here. Now book-to-bill is normalizing with a ratio of 0.95 or 0.95% in the quarter, but we still have high order backlog to deliver on. As a consequence, the restrictive slotting made orders in Q2 to decrease with 42% to ensure flexibility with pricing. However, as I stated already in the last report, order intake is currently not a good or the best indicator of the market activity. It is still the size of the order book, fleet utilization and customer finance and all these indicators or as for trucks showing healthy levels. Deliveries decreased with 27% mainly related to China, but also partly due to supply chain disturbances in other parts of the world, for example in Europe. In the bus segment, confidence among our customers has started to pick up, particularly in North America, where utilization of the bus fleet continues to increase. Orders were up with 44% and deliveries up with 22%, but still from very low levels. In the quarter, Volvo Buses launched a powerful and fuel-efficient performance step for the coach driveline. With the power ratings up to 500 hp and fuel savings of up to 9%, it will be a true cost saver for tour, charter and line haul operators. For Volvo Penta, the market remains strong in all segments, but is, however, fighting with long delivery times due to challenges in the global supply chain that is hampering also order intake and deliveries. As a consequence, orders were down with 25% and deliveries with 1%. But it is important to say that we still have a broad-based and good demand across segments and regions, and daily focus now is to continue to increase deliveries to meet the strong order book. On the business development side, yet another segment is going electric, as Volvo Penta's electric driveline now is also powering city fire trucks in North America, as you can see on the slide here. On financial services, we had record retail financing business volume during the quarter, together with a stable penetration of around 30%. VFS continues to have a strong portfolio performance with low delinquencies, indicating continued good customer activity and profitability. Volvo Financial Services is a very important lever for the transformation into new technologies and business models, and we continue to see lots of good progress. On the business development side, BFS recently began offering customer financing in Portugal, also providing that opportunity for all segments in Portugal. So by that, Krister, that was the business update. So I'll leave over to you.

Thank you, Martin. And that brings us to our next speaker, our CFO, Tina Hultqvist. Tina, can you please give us the financial numbers?